One would think nothing would be farther away from the stresses and pleasures of trading than the opening ceremony at the Beijing Olympic Games. And yet, traders had the opportunity to learn a lesson on integrity.

The Chinese put on a great show and in the name of producing a great show, saw fit to exclude the live performance of a little girl because she was not ‘pretty enough’ (It’s true that her teeth needed some dental work). Instead they chose to use another child and lip sync. When challenged the Chinese spokesperson said that it was acceptable for the Chinese Olympic Committee to do this because ‘they all agreed’!

For those of us that have been brought up in the Classic Liberal Tradition the thought that a majority decision makes a deception OK is frightening. But what is even more frightening was watching the Western spokesman for the Olympic movement rationalizing the deception.

What has all this to do with trading?

I learnt from Ayn Rand that deception in any form is unacceptable. We start with small deceptions (white lies) and incrementally the lies and deception grow in stature. It doesn’t help that we all lie and deceive - it seems to be part of the human psyche. As traders we need to ensure that we correct any lies we tell ourselves - face the pain, correct and move on.

I have (perhaps had … read on to see what I mean) a certain pattern of breaching discipline. And I could not seem to eradicate it.

There are (were?) times when I’d ‘lose’ it. Nowadays, this means a 2% to 3% losing evening - much better than the old pattern of wiping out my account. The elements of the pattern are clear:

  • Anticipation of a major turning point.
  • A small range day - this creates uncertainty because I have difficulty reading market structure.
  • A poor initial trade location in the direction of the plan.
  • A ‘Stop and Reverse’ - in fact many Stop and Reverses: selling every low and buying every high in a small range day.
  • A feeling: “I’ll show you”. You know the feeling - the kind you get when you and your spouse are having a fight and all you want to do is win - the issue has long been forgotten or has become irrelevant.

I have come to the point where I recognise when I am in such a mood. I react by cutting my position size down to 10% of normal. But I knew that this was only temporary solution; I wanted to eradicate the behaviour. Of course, the best pattern interrupt was to get up and walk away - but I wouldn’t do it.

Now let’s turn to Tuesday’s price action. I wrote about my trading in “Let the Market Come To You“.

This was the type of action that could lead to a ‘losing evening’. It wasn’t an exact fit because I did not consider Tuesday as a turning point date. But there have been times when such price action would lead to breaches of discipline.

I didn’t have that problem on Tuesday and I have to give credit to a session I had with Nazy Massoud (Mental Edge Trading). I had purchased Nazy’s book on journalling and it came with a 30-mins one-on-one session. I didn’t learn new distinctions from her book but her advice helped tremendously (or in Australian terms helped heaps!). If you have trouble knowing what to record in a journal, then her book is worth reading.

The reason I am telling you this is to illustrate the importance of integrity: had I told myself - ‘there is no problem’ or ‘I have the solution’ (when I had only part of it), I’d have never found a possible answer to my problem. Sure I was lucky that I came across Nazy. But had I not been honest about having a problem, I may not have sought the solution for it.

In trading, one white lie is one lie too many.

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